Conditions to closing are those matters which the company must satisfy (or which must be waived) prior to closing in order to trigger the investors' obligation to purchase the shares being sold by the company. The two most essential conditions to closing are (a) filing of the amendment to the company's certificate of incorporation containing the terms of the new preferred stock being purchased with the secretary of state of the state in which the company is incorporated; (b) that all of the representations and warranties made by the company in the stock purchase agreement are true at the closing and (c) that the company has complied with or performed all agreements, obligations and conditions contained in the stock purchase agreement that are required to be performed or complied by the company prior to the closing. Other typical closing conditions include:

1. Execution of an employment agreement between the company and each founder;

2. Delivery of a legal opinion in connection with certain matters relating to the financing by legal counsel to the company;

3. Delivery and approval of an annual budget;

4. Execution of intellectual property assignment and confidentiality agreements by each of the company's employees;

5. Obtaining of key man insurance on the life of each founder;

6. Delivery of a management rights letter to one or more investors;

7. Creation of a new board of directors of the company in the size and composition required by the new investors; and

8. Execution of ancillary investment documents by the company.